Britain and Germany are to work closely on modernising their health sectors, including on controversial British government plans to allow some hospitals to operate more independently of the National Health Service.

Senior officials from both governments agreed in Berlin to share experiences on the management of non-state hospitals, on increasing patient choice and improving financial incentives for medical practitioners.

Simon Stevens, senior adviser to Tony Blair, UK prime minister, said London was "very interested in the system of not-for-profit hospitals operating [in Germany]", although he noted the similar British model of "foundation hospitals" had proved politically divisive within the ruling Labour party.

A motion supporting foundation hospitals was defeated at last week's Labour party conference.

The agreement comes despite fundamental differences between the health care systems in the two countries. But it reflects the need in both countries to tackle efficiency and choice issues, health experts said.

The British government plans to increase spending in its tax-based health system by 6 per cent a year until 2006, Mr Stevens said. In contrast, the German parliament last month adopted health reforms aimed at cutting health spending in the country's insurance-based system by €23bn ($27bn, £16bn) by 2007.

Susanne Weber-Mosdorf, head of the Berlin health ministry's international department, said Germany had much to learn from Britain, despite the NHS's reputation among Germans for long waiting lists and underfunding.

At a seminar organised by the Anglo-German Foundation, she said the NHS's National Institute for Clinical Excellence (Nice) had served as a role model for a similar institute to be established in Berlin to test the use of certain drugs and medical practices.

Mr Stevens said Britain would eventually introduce a system of hospital ownership that combines non-profit foundation status with accountability to local representative bodies.

He said Britain wanted to learn from Germany's financing system that links statutory health funds with doctors, and from the planned introduction of standardised payments for certain hospital services, aimed at improving efficiency incentives.

Ms Weber-Mosdorf admitted that despite ranking as one of the world's most expensive heath care regimes, the German system was inefficient, non- transparent and susceptible to pressure from lobby groups.